The fierce debate over "Stablecoin Yields" and "Bitcoin Standard" at the Davos panel

At the World Economic Forum held in Davos, Switzerland, Coinbase CEO Brian Armstrong and François Villeroy de Galhau, Governor of the Bank of France, engaged in a sharp debate during a panel discussion on tokenization. The core issues of the discussion centered around whether stablecoins should pay interest and what role Bitcoin should play in the global financial system.

This debate was not merely a technical discussion. Instead, it highlighted the relationship between the traditional financial system and the digital asset industry, as well as serious conflicts over national monetary sovereignty.

Stablecoin Yield War: Maintaining U.S. Competitiveness or Avoiding Systemic Risks

The main focus of the panel was whether stablecoins should be allowed to pay interest to holders. While this may seem like a technical issue, it actually involves multiple layers including consumer rights, international competitiveness, and financial stability.

Armstrong strongly argued for the benefits of interest payments on stablecoins for consumers and the industry as a whole. “First, it brings more funds to consumers. Second, it enhances global competitiveness. China has announced that it will pay interest on its CBDC (Central Bank Digital Currency), and overseas stablecoins already exist. If U.S. regulations prohibit reward payments on stablecoins, foreign competitors will thrive,” he stated.

In response, Governor Villeroy de Galhau warned that granting interest to private-issued stablecoins poses significant risks to the traditional banking system. Concerned about destabilizing the financial system through yield competition, he emphasized that “public purpose should be to maintain financial stability,” and clarified that the digital euro, as a CBDC, should not pay interest.

Bill Winters, CEO of Standard Chartered Bank, supported the stablecoin side from a practical perspective, noting that without yields, tokens would lose much of their appeal as a “store of value.” Meanwhile, Ripple CEO Brad Garlinghouse stated, “Competition is good, and a fair playing field is important,” but also distanced himself by saying, “Ripple is not heavily involved in this dispute.”

Provoking the Bitcoin Standard: Clash of Democratic Oversight and Technological Autonomy

The debate intensified when Armstrong proposed the concept of a “Bitcoin standard.” He provocatively argued that, as a hedge against fiat currency devaluation, the global financial system should shift to a new currency regime based on Bitcoin.

Villeroy de Galhau countered this proposal by emphasizing the need for democratic oversight and national sovereignty. “Monetary policy and currency are part of sovereignty. We live under democracy,” he said, asserting that monetary policy and democratic governance are inseparable.

During the discussion, Villeroy de Galhau attempted to contrast trust in central banks with Bitcoin, but this revealed a misunderstanding of Bitcoin’s decentralized nature. “Trust is guaranteed by the independence of central banks. I trust an ‘independent central bank with democratic authority’ more than a ‘private issuer of Bitcoin,’” he said. Armstrong immediately corrected him.

“Bitcoin is a decentralized protocol, and in fact, there is no issuer. When we say that central banks have independence, Bitcoin is even more independent. No country, company, or individual controls it,” Armstrong stated, prompting a rebuttal.

Villeroy de Galhau dismissed the Bitcoin standard debate, warning instead that stablecoins and tokenized private currencies could pose political threats, especially to emerging economies, if left unregulated. “Unregulated innovation can lead to serious trust issues. The first threat is privatization of money and loss of sovereignty,” he said, emphasizing the risks of private currencies becoming dominant and dependent on foreign issuers.

Striving for Regulatory and Innovation Coexistence: CLARITY Act and Industry Future

The discussion also touched on U.S. cryptocurrency regulation, particularly the CLARITY Act. When moderator Karen Tso hinted at Coinbase’s recent withdrawal of support, Armstrong argued that the process is simply in an active revision stage, stating, “U.S. legislation is progressing smoothly regarding market structure. It’s not stagnating. We can say good rounds of negotiations are taking place.”

When explaining why Armstrong withdrew from last week’s session, it was revealed that this move was part of a defense against traditional financial gatekeepers. “We want to ensure that legislation related to cryptocurrencies in the U.S. does not prohibit competition. Washington D.C. banking lobby groups are trying to eliminate competitors by force, and I strongly oppose this,” he said, highlighting the conflict between the industry and traditional financial institutions.

Meanwhile, Garlinghouse, who largely agrees on the need for fairness, stated, “I strongly support the idea of a fair competitive environment. Also, a fair competitive environment should be reciprocal—crypto companies should follow the same standards as banks, and banks should follow the same standards as crypto companies,” advocating for mutual regulatory standards rather than unilateral demands.

Hope Amidst Conflict

Despite ongoing friction and conflicts, a common understanding emerged among panel members: regulation and innovation must ultimately find a path to coexistence. As Garlinghouse posted on X, the discussion was “lively,” but the fact that all parties recognize the need for coexistence suggests a significant turning point for the industry’s future.

The Davos panel discussion not only revealed differing positions but also highlighted that the digital asset industry and the traditional financial system are engaged in an inevitable process of dialogue and negotiation. The three key issues—stablecoin yields, the Bitcoin standard, and U.S. regulation—will continue to be important topics shaping the relationship between the industry and regulators.